We Study Billionaires - The Investor’s Podcast Network - RWH070: Hunting For Hidden Treasures w/ Christopher Begg

Starting point is 00:00:00 You're listening to TIP. You're listening to the richer, wiser, happier podcast, where your host, William Green, interviews the world's greatest investors and explores how to win in markets and life. This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now for your host, William Green.

Starting point is 00:00:31 Hi there, this is William Green, host of the richer, wiser, happier podcast. Before I welcome today's very special guest, I wanted to share some news that I'm really excited about. Later this year, I'll launch a new richer, wiser, happier masterclass for a small, very intimate group of 22 people who'd like to study with me over the course of a year. We'll meet once a month over Zoom to discuss the most important themes in my book, Richer, Wiser, happier, and I'll also talk about how my thinking on these sub-sabier. continues to evolve, drawing on lessons from hundreds of hours of interviews that I've conducted with many of the world's greatest investors. Members of the Masterclass Group will also be invited to join me, two unique in-person events, starting with a two-day gathering in New York later this fall.

Starting point is 00:01:26 My goal in forming the Masterclass is to create a year-long journey of exploration for people who are deeply interested in building lives that are truly richer, wiser, and happier. If this idea appeals to you, please email my friend and fellow podcast host Kyle Greve, who's in charge of the wait list, and he can share details with you about prices and dates and the like. His email address is Kyle, that's K-Y-L-E, at the Investorspodcast.com. I should also mention this will be the third year in a row that I've hosted a richer, wiser, happier masterclass. The first two groups included an amazingly accomplished selection of people from many countries around. the world, including some hugely successful hedge fund and mutual fund managers, various asset allocators, wealth advisors, managers of family offices, a management consultant, a doctor, several CEOs and entrepreneurs, and a renowned physicist turned quant fund manager. Part of the beauty of the

Starting point is 00:02:25 master class lies in the very strong relationships forged between its members, many of whom have become really good friends. If you like the idea of studying with me and this extraordinary group of keen investors and passionate learners, please email Kyle at theinvestorspodcast.com. And if the stars align, I'd love to see you later this year when the masterclass begins. Thanks so much. And now on with the show. Hi, folks, we have a very special treat for you today. I'm really excited to welcome back a terrific hedge fund manager who's one of the most

Starting point is 00:02:58 thoughtful people in the investment world and one of my favorite people in the investment well, too. His name is Chris Begg, and he's the CEO and the CIO, the chief investment officer of East Coast Asset Management. Chris teaches the security analysis class at Columbia Business School that Ben Graham famously taught back in the early 1950s when his star student was Warren Buffett. He's also a dear friend, so I'm particularly thrilled to have him back on the podcast. It's wonderful to see you, Chris. William, it's great to be here, as always. Thank you. And I was just explaining to you before we started that part of my challenge today is that you gave me so much to read of your unpublished essays and the like that I ended up this morning with 42 pages of notes and questions that I'd put together while preparing for this interview. I counted it was almost 20,000 words. So there's this sort of perennial challenge of synthesis and distillation. I got it down to about 13 pages this morning. So if I'm confused, you'll know why. So I've spent the last few days reading a lot of.

Starting point is 00:03:59 of your unpublished essays. And I think our last count you'd written, so like 46 of them. And I've read probably a couple of handfuls. I've listened to dozens of the 150 songs or more that you've written in the last couple of years. I've reread your last year-end letter, shelled, which is 30 pages, plus an addendum, an unpublished addendum that was another 11 pages. And so as I was working my way through this, I was like, oh my God, my friend Chris, he's actually a much more prolific writer than I am. And I started to realize, oh, this is like really central to your process, the process of writing.

Starting point is 00:04:35 And it's so key to you in terms of building your philosophy of investing, business, and life. And so I wanted to start actually by asking you about the process of writing for you and why it's so important as part of this broader challenge that you have and that I have, which you describe as compressing complexity into essence. That's right. Wow, what a great intro, William. Thank you. Yeah, the writing for me, when we launched the firm in 2008,

Starting point is 00:05:06 there was a lot I had to say because I had to articulate the process. And so I started to writing quarterly letters. And the quarterly letters were so helpful to me as I was kind of working through getting that process articulated on paper. And that moved to annual letters. There wasn't as much to say quarterly, plus there was a lot of work getting those quarterly letters out. And the annual letter became another way to compress how the philosophy was evolving, holdings and so forth.

Starting point is 00:05:37 I still look back at those, at that period of time is probably the most important period of learning that I've had. And so having a methodology to take this learning and to put it into words and then And with the idea that there's an audience that might read this, so there's a bar of excellence that you're looking for, a quality that you want versus it just being in my journal, the learning being in the journal and so forth. And a couple of years ago, I paused some of the year-end letter writing as well. And there was a couple of years where I didn't have an outlet for some of the learning I was doing. And so when I came back to it, which you referred to

Starting point is 00:06:16 the year-end letter last year, it kind of opened up something in me. that had been kind of held back. And so now, like you said, this period of time, which is the last 12 months or so, has been probably the most prolific writing I've done in my career. And these essays that have emerged from the learning, they've been fun to write. And I continue to get a lot of satisfaction from the process. So your next question at some point is going to be, well, what are you going to do with them? How are you going to publish them? And after your dinner in Omaha, I was walking with Eric Markowitz, who's writing a beautiful book called Outlast last about things that endure through time. And I shared with them about some of these essays

Starting point is 00:06:56 that were coming out. And I was calling them essays at the time. And he was the first person that said to me. He's like, wait a sec, Chris. At the time, it was about 15 to 18 of these, 3,000 words apiece. He said, so let me get the straight. You've written a book. So maybe it's on its way to something that looks like a book. But we'll see. Yeah, that would be great. And Eric is working on something really important and we'll definitely I hope come on the podcast when it's published in several months. And it's very similar in a sense that both of you are looking at what endures, what outstanding businesses endure, for example. And so, yeah, we'll discuss that topic further as we go along. One thing that struck me

Starting point is 00:07:39 is that even though you're very prolific with your writing, you're really not in a hurry. And when you did come out with that year-end letter at the end of 2025, which we'll discuss a lot in this discussion, because it really gets at some very profound ideas, I think, about investing in life. When you published it, you pointed out that actually it was two or three years since you'd publish your previous annual letter, which is kind of interesting and unusual. And you wrote, over the last two years, I found that every time I sat down to write what I thought would be the next letter, the ideas were still becoming. And you said certain ideas need to be lived longer before they can be written honestly. And you like me, are somewhat obsessed with Robert Persig and Zen and the Art of Motorcycle Maintenance. And I kept thinking about this line that he wrote that I don't know if you remember that I

Starting point is 00:08:28 think I quoted in the notes on sources and resources in my book where he said, as he was setting about writing his book, he said, I don't want to hurry it. That itself is a poisonous 20th century attitude. when you want to hurry something, that means you no longer care about it and want to get on to other things. I just want to get at it slowly, but carefully and thoroughly. And I wondered what thoughts that stirred in you. Oh, I love that. Yeah. And as you know, Persig is probably my favorite, one of my favorite authors, definitely two of the best in my top 10 books are Zan and Lila. So, yeah, I feel those, the year-end letters are a reflection on this craft that we've taken on.

Starting point is 00:09:16 And they should be approached with a sense of mastery. And during that time period, I was working through something I thought was very, very important that I thought could be compressed to a year-end letter. And when I realized, it struggled to be – it couldn't fit into the year-end letter. format. And I had to let go of a little bit of what that topic was and allow it to come out in different other forms. And that was okay. So coming back in writing this year on letter, distilling pieces of what I had been working on, it was a relief in a way, because I had to release a little bit of what I wanted to say in its full form. So as you know, what we've tried

Starting point is 00:10:02 to do at East Coast is a little nonconforming. We're trying to compound capital at very high rates of return over a long period of time. And we've self-selected for bringing partners, friends, along with us. We're not in, we're not thinking of ourselves in the business to build a big investment management company. That's never been part of our objective is it's to really think about excellence and quality. So our partners, if we miss a year-end letter because we're working, on something, I think they're quite forgiving and they understood that the process has not paused at all. And I should probably mention I am a partner in the fund. So I was quite happy with Chris's silence. I'm like, good, he's working on something that may enable me to retire before the age of 135.

Starting point is 00:10:50 I thought part of what was interesting, though, you know, one of your essays is about what you called the consecration of attention. And so this idea of going slowly and living really thoughtfully with important subjects. This is more than a passing interest of yours. And it's obviously a huge, timely issue and challenge at the moment. And you wrote in that essay about how we're all living in this environment that trains people to seek interruption, to prefer novelty to continuity, to confuse the constant movement of information with the actual deepening of understanding. And you talked about the challenge of this bottleneck of attention, as you put it. Information floods towards us.

Starting point is 00:11:34 Summaries multiply. Opinions crowd every surface. Almost anything can be sampled instantly. A person can live in the illusion of omnidirectional learning while scarcely having entered anything deeply enough to be changed by it. And so I'm really curious because I'm so faced with this issue, right? I'm constantly bombarded with podcasts and books and articles and substack pieces and everything seems kind of worthwhile or marginally worthwhile. And I'm wondering how in the midst of this kind of

Starting point is 00:12:03 bombardment of information, of this illusion of omnidirectional learning, as you put it, how have you managed to train your attention and develop what you call the will to remain with a topic until you reach hard one simplicity? Yeah, this was something that I think early in my career, I realized I had much more of that right brain, creative, but also the willingness to kind of go broad. I think in the early days, if I were to critique my process, I was maybe a couple inches deep in a mile wide. I wanted to know a lot about physics, biology, you know, you wanted to just have the

Starting point is 00:12:45 information. But when tested, I realized I didn't have a first principle understanding of that. that topic at a level that I was, you know, I could pass as being, you know, knowledgeable about it, but it wasn't the level that I wanted to be knowledgeable about it. So I set out a goal as we've talked about in the past where, you know, I would spend these three-month periods of time going very, very deep, that consecration of attention to train myself to really understand something from the foundation up. And that habit clicked because I really, really enjoyed it. And I realized when I did that, I was starting to connect one field to the next. And I had

Starting point is 00:13:29 a place to store the information in my mind so I could access it. It had a longer shelf life when I was doing this. It wasn't like in and out. So I guess it created a bit of a flywheel, a reflexivity. Once I saw it working, then I continue to hone the habit. And to this day, that process definitely lives in the portfolio. We run a long-only concentrate portfolio so we can get to know these companies really, really well. And it feels like we're going on a journey with them that in the early stages, we expected to last decades.

Starting point is 00:14:04 So we can go unhurried. We can have this deep understanding, this deep relationship with the information. And I feel like all these subjects that I work on, they're not subjects. They're almost embodied learnings that become part of you. And that's why I wrap them in art, in poetry, and other things, because each one of those mediums have a different connection to the material. And that's what's been fun about these essays, is that it's a way to take some of these personal portals and find the underlying law that is a general principle that can be observed through this portal. Yeah. And I think part of why I wanted to start by

Starting point is 00:14:46 discussing this subject is I wanted to make it clear to our listeners and our viewers that in a way, this isn't just about investing. It's about a different way of carrying yourself in the world where there's so much pressure to be quick and shallow and scattered. And one of the things that makes, I think, your approach worthy of study is the fact that it's so countercultural. And there's a line that I thought I would quote from that essay on the consecration of attention that I really love, where you said, everywhere I have found anything worthy, I have found the same hidden law beneath it, stay longer, go closer, return again, refuse premature summary, hold the light steady, let the thing teach you how it must be seen. And that clearly has huge

Starting point is 00:15:35 ramifications for investing, as we'll see, because a lot of what we're discussing is looking at companies that are temporarily obscured by misperception. Can you talk about that idea of just as a general sort of operating principle, staying longer, going closer, returning again, refusing premature summary? Yeah. You know, when we think about the normal tendency that we all have as humans is a system one instinct of survival and distinction. You know, there's this, those are the things that are working on us at all times. And as we get bombarded with this information, short-term information, you're feeling, ah, this is fearful, or I want to do more of this because I'm seeing others winning

Starting point is 00:16:25 by doing more of this. And so that's the temptation, certainly in investing, is that you're constantly being bombarded by short-term news that's giving you a sense of fear or greed or fear or, you know, missing out. And so trying to quiet those natural instincts so that you can reason through something, you know, what Kahneman talks about System 2. And then moving beyond System 2, where it becomes embodied, right? That when you see the short-term news, you can, you quiet it naturally and that you're being guided by an intuition that feels natural. And I think that connects to what you said is this, it just becomes a habit of doing it more and more where

Starting point is 00:17:11 you can actually feel into these moments where, okay, I feel system one gearing up around these things. But I know the quieting of that. I know what it feels like to quiet it. I know what it feels like to reason through. And I know what it feels like to have a intuition or insight that guides me into something that maybe is more intelligent. Do you have recommendations when you're teaching your students, for example, or analysts at your fund and you're trying to encourage them to build a life that fosters that kind of spaciousness and ability to think and go deep? What do you actually encourage people to do in terms of their habits from meditation to sleep to breathing, whatever it is? And in your case,

Starting point is 00:17:54 I think part of it is that you spent half the year living basically in the jungle, not in such a rustic way, but physically very removed from the noise. Yeah. I was thinking about that this morning, William. Would Warren Buffett be the investor that he became if he lived in Manhattan? Can you picture Warren living in Manhattan and having the track record that he had, right? There was a sense of that removal from maybe what felt very hurried to do something that was more long-term oriented. So I think geography is really important.

Starting point is 00:18:34 I see a lot of MBA students, probably over 1,000 now, that come to me usually in their second year at Columbia Business School. And they're exceptional, right? Of course, they're exceptional. They're there. But the speed with which that they're in a hurry to get back into the. the workforce to get back into making money, paying off student loans, whatever it might be, it's hard to slow them down. It really is. And they're seeing what their friends are doing. They're interviewing. They're getting a job at an investment bank and they have to take the interview.

Starting point is 00:19:06 But I get to a handful of them and they leave our course, our time together and they're saying, ah, I'm seeing things differently. I'm going to do this, I'm going to take this track. I'm going to work for a business and learn how to operate a business. And I love that. It's not that I'm trying to I don't have any philosophy of the way to do it, but some listen and change track. I love working with undergrads for that purpose because they're a little bit more removed from it. They're a little bit more of a blank canvas and you can kind of share with them some of these things that may lead to them having more spaciousness for a career that might align more

Starting point is 00:19:47 with their temperament. I was very struck. I went on a meditation retreat a few times with Sokney Rinbusha, who's been a guest on the podcast with Daniel Goldman, the writer of emotional intelligence, is also a great meditation expert and practitioner. And when I went in New York, the first couple of days, I would say Sokney had all of these practices to get the New Yorkers like me to settle their nervous energy. And there's a beautiful Tibetan Buddhist word where he would talk about Lung, which I think means this kind of speedy, buzzy energy that's up in your head, which I have the whole time, or at least much of the time.

Starting point is 00:20:21 And then I went and did a meditation retreat with my son, Henry, a six-day meditation retreat with Sokne Ruf Shea in England, in the countryside in England. And that process that took about two days in New York took about five minutes in England. Like they were so much less buzzy and frenetic. And it was, I had this image. It sounds like a negative image, but it's really not of them as like cows chomping in the field. Like it was just so much easier for them to settle.

Starting point is 00:20:45 And so I think that's one of the big challenges that we have. It's like, you know, you need to be pretty dynamic to do well in the world and to compete. And yet at the same time, you need this kind of this chill, spacious, calm, quiet ability to sort of step back and see truth, I think. Yeah, we've had this multi-geography life now for about seven years and two different latitudes. and it was a bit of work for the family to kind of re-architect. COVID was a little bit of our permission to at least experiment with this. And it's, I think from an investment standpoint, it's really, really been kind of transformational in the sense of opening up a different lens, a different calibration of

Starting point is 00:21:34 time. And I think connecting with nature has been, is something that I continue to see, to enormous benefits from, whether it's surfing or going for a long walk and thinking, all of those things I think are really important to think through something that's really important. We're working through investment decisions. I was even really about Nikola Tesla, when he came up with his most insightful idea, it was like literally on the banks of a river quoting Gerta. He was like listening to, he's like reciting poetry and it clicked.

Starting point is 00:22:12 You know, so I think removing yourself and being in a place where you can think independently is extremely valuable. I wanted to talk in some depth about your end letter from 2025 because I think it gets at some really, really important points about how to invest and think and businesses, how to live. And as part of my preparation for this conversation, I was looking back at our old text messages because we texted each other pretty often. And you had sent me a draft of your year-end letter back in January before you published it. And I wrote back to you, I just finished reading your extraordinarily rich shareholder letter. It's a lovely letter,

Starting point is 00:22:52 exceptionally thoughtful, full of intellectual riches, soulful and beautifully written. I'm not sure that I can think of anyone other than Warren Buffett and Nick Sleep, who has written shareholder letters of this quality. And then I said, I read the final section to my wife, Lauren, just now and then said, he can really write. And I said, as she knows, that's very, very rare praise. from me. And so, yeah, really struck me this letter. And so I went back this week and spent a couple of days with it because it's long. And then there was this unpublished addendum that you'd written since then, which I also read. And the letter gets at this really important overarching theme. It's all about things that are hiding in plain sight. Can you talk about that theme and about

Starting point is 00:23:35 how you relate it to this pirate ship, a treasure ship from your childhood? Yeah. Thank you, William. By the way, when I sent you an early copy of the letter, that was like, that was the most unsettling, the waiting process if William would approve of this letter. When you sent that back, it was very kind because I felt like it, I had, I was close to a final draft at that point. You know, the hiding in plain sight, I always like to find a personal portal to a law. And so I was thinking back to what really, really got me excited about. research and research as a craft. And I reflected back to my, it was my senior year in high school. And I had probably my favorite teacher of all time, Mick Carlin, and he was the journalist teacher at Barnesville High School on the Cape where I went to high school. And he was one of these just real exceptional teachers. And if your work, your research work, your journalism was good I didn't know if you got published in the school newspaper. So at the time, my father's best friend, Barry Clifford, best friend from growing up, had discovered

Starting point is 00:24:44 the only recovered pirate ship about in 1984, so years earlier, and it'd been kind of the part of the family, right? Like listening to the stories of this pirate ship, and of course, as a young boy, there's nothing of a better story than it found pirate ship. And he found it right off of Wellfleet. It was literally not far from where we kind of grew up surfing and to think that this treasure was under the water, hiding in plain sight. So I wrote about it for that paper and was published in the school newspaper, but it stayed with me. And so the letter was a was kind of a reflection on that history. My love really started my love of research and to realize

Starting point is 00:25:29 that if you worked with something long enough, with the research, you can actually arrive at an insight or a treasure in the case of what Barry found. And I find that that's kind of what we do every day. If we're really kind of looking across this wide field of investment opportunities to try to understand what is hiding there, what is that exceptional business that for some reason is being ignored and therefore the valuation gives us an opportunity to earn above market returns over a long period of time. So that's really the element of our process. And it ties back, actually, to what we were discussing before about slowing down. Because you talk in the essay about, you say often the most important truths are not hidden because they're obscure,

Starting point is 00:26:24 but because they're quiet, familiar and easy to pass by. So you're talking to you talk, about the work of, quote, seeing clearly what others overlooked, slowing down long enough to recognize what was already there. Because that boat was there, that pirate ship, I think, had sunk in 1717. And so, you know, 250 or so years longer, it had sat there. So in terms of like what you saw of the process from watching someone like this treasure hunter, who was your dad's friend, Barry, what did you learn about the process of finding stuff, finding Barrow treasure, which is really what you're doing in the stock market. Yeah, the process gets back to what you had said earlier, which is that consecration of attention.

Starting point is 00:27:06 We are looking for, we own less than 10 companies in our portfolio, so nine companies today. Each one of those is a found treasure. They're rare, right? To earn what we deem to be above, you know, we're underwriting 15% or better IRAs over 10 years. And over our 16-year time period, we've been able to translate that objective into returns. And so each one of those things has a lot, each one is a treasure that has to do a fair amount of heavy lifting over a long period of time. And so we treat it as such as you don't get, you have to focus that work so that when you have an opportunity that you can act with a sense of conviction. and a sense of knowing that this is something that's actionable.

Starting point is 00:27:59 So that's the process. And I saw that with Barry. I saw it with anyone that has done deep research, deep work, and then comes to the other side with a really a high probability insight. That's ideally probably non-consensus but right. That's really the work. Let's take a quick break and hear from today's sponsors. Curious about online trading, but haven't taken the first.

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Starting point is 00:31:22 Start your free trial at Shopify.com slash TIP. So as we've discussed on the podcast before, you have what you call your Grove of Titans, which is this small selection of exceptional businesses that have a rare combination of qualities that provide exceptional long duration compounding. And so I wanted to talk a bit about some of these great businesses that you've identified in this very kind of painstaking way, often looking at what's, as you would put it, hidden conspicuously, not concealed, but unrecognized. and how these companies illustrate different principles of how you invest.

Starting point is 00:32:06 And so, you know, I think it's helpful to tether ourselves to the companies themselves because in some way otherwise the concepts can sound really theoretical and abstract, but they're actually really important underlying laws and principles. So I thought I would start by asking you about Alphabet. And you wrote at one point in your letter, the end of the year letter, alphabet remains one of the most extraordinary businesses ever built. At its core, it is a graph, or as Americans would say, it is a graph designed to organize the world's information and make it universally accessible and useful. And so this gets at a really important theme for you,

Starting point is 00:32:44 which is this idea of graph theory, of graphs, of edges and nodes, and your focus on investing in graphs as they become stronger. Can you talk about that? Can you explain that way of looking at the world by telling us about alphabet? Because I actually, I think you've noticed something that's so fundamentally important and that as we go through this conversation, some of our listeners and viewers will start to realize, oh man, he's figured something out. Yeah, there's three pillars. You know, we look at the Grove of Titans, which is this universe of exceptional companies.

Starting point is 00:33:20 Each one of them, we feel, has, you know, three pillars. And the three pillars is, do they have a moat and is it widening? And we kind of deconstruct that. There's eight different layers of moat that we're looking for. And not that we want every company you have all eight, but we want layers of a competitive advantage that's identifiable and that we understand. And that as we're looking at that moat, we're like, is this something that's going to be still present 10 years from now in a different form? So these things, we want to make sure they have a long shelf life. The second piece, is really secular tailwinds, and secular meaning long-term secular tailwinds that's driving

Starting point is 00:34:00 the top line growth of the business. We don't typically do a lot of things where they're facing secular headwinds that they're being disrupted by something, even if we think that disruption may take some time. We usually avoid those things. So, mode, secular tailwinds. And the last piece is the human element, right? We want to partner with great, great operators that ideally have a history of a pretty intelligent capital allocation. So those three things give us kind of a quality score on the business that we would put in that Grove of Titans basket, that we're just spending our time, really understanding valuation. And when we're looking at 10-year valuations, right, we want to find something that's going to earn 15% rate of return from today's price

Starting point is 00:34:44 over 10 years. We've measured that on free cash flow growth. And so when you get the quality at a reasonable price, there's usually clouds, right? There's clouds around the business that give you this opportunity to invest when perhaps there's some ambiguity in what the business. So this is a little bit of a backdrop to understand Google because Google is probably one of the most extraordinary companies that's ever been built. As you noted that I said in the letter, in the search business, it was designed and built around graph theory.

Starting point is 00:35:19 And graph theory is something that, you know, when you look at nodes and edges and how things scale, when nodes and edges are populating across a domain, we start to see increasing returns to scale. And I think that's one of the things that a lot of people have misunderstood about this period of technology is that as these businesses that have gotten bigger, they haven't run into this law of diminishing returns. They've actually, their growth has accelerated. And so Brian Arthur kind of did this work at Santa Fe Institute, and we started to understand that what is present that is allowing for this increasing returns to scale? And in our conclusion, it's this, there is a presence of a graph that's allowing for the information

Starting point is 00:36:11 to grow and to grow exponentially through the nodes and edges that are available to it on the graph. And so, when you look across and you start seeing things from a graph lens, you're like, oh, there's another graph, there's another graph. Amazon's a graph. Tesla, you know, we could talk about other things where graphs are present and that they're in the kind of the part of the S curve where that growth is now populating across the nodes and edges of what they've built. So yeah, Google's search business is still a dominant business for connecting ads to

Starting point is 00:36:46 consumers and it's allowed them to build a number of other businesses. Google Cloud now is an extraordinary business and going to be a bigger, bigger piece of the overall Google evaluation. We have YouTube, we have other businesses that have been built, right? You have Waymo. But at the core, when we got involved in Google, I think they were, I think their AI advantages was not as understood as it is now. And Dennis Sassab is, it was, and we, it was, in what he's built in deep mind and in Google, is in our, you know, it's still in our, in our perception is the lead, really leading an AI, leading in not necessarily what we hear about Foundation Labs and building LLMs. Yes, we do that and we do that very well, but there's a

Starting point is 00:37:34 large AI effort that Demis has led, which is leading to all kinds of different applications we saw with Alpha Fold, healthcare breakthroughs, AGI, ASI, So we think there's a lot of things that are misunderstood about their AI advantages and how broad it is. Yes, I'll stop there. If you want to add anything. Yeah, I mean, just to highlight a couple of points, there was a line you wrote, I think probably in your annual report where you said much of our research effort is devoted to a simple question, are the clouds temporary or permanent? And so I think that gets at something really essential in your process, that you're finding these businesses that have some underlying structure

Starting point is 00:38:16 as we'll discuss increasingly in this conversation that's enormously powerful. But you're buying them at a moment where there's a kind of misperception that's leading the market to misprice them typically. Is that a fair summary? Yeah. And the internal conversation that we have with any company that we own, as we say, what are the clouds? How many clouds are there?

Starting point is 00:38:41 What is our most important questions around those clouds? And that's where a lot of our work lives. There's one thing to understand the competitive advantage and all of these things, but it's the clouds that really where we devote a lot of time and understanding because that's where the misperception or the mispricing exists. So in the case of Google over the last couple of years, there was this cloud around that blue links were going away. All of our search eyeballs are going to go to LLMs,

Starting point is 00:39:11 and we're going to move those eyeballs off the Google platform on to Open AI, on Anthropic. And you had to understand that from first principles, and to say, is that true, is that perception going to be a reality? It's not yet. And that's usually where we see this gap between perception in reality. And that's where the cloud lives. It's a perception that something might change versus evidence that it is.

Starting point is 00:39:37 And so when we fast forward a year, what we realize is actually Google's their search volumes were going up with AI, not down, and that they were able through those eyeballs to bring more of their customers to look at AI tools. Maybe the pioneers in look at LLMs were downloading Open AI and using ChatGPT and so forth. But there's the whole middle of the bell curve that's experiencing AI for the first time through the Google search bar using you know, different AI tools that are being shown to them and say, oh, okay, this is interesting. We're going to download Gemini and others. So that cloud has dissipated. And last year, you know, it translated into a lot of alpha generation for us. The second cloud that was

Starting point is 00:40:30 there was regulatory, you know, was antitrust FTC going to break up Google in a way that would be disruptive to us in our long term having this as one entity? So we had to look at carefully and break down a probability array to understand that, we end up getting an FTC ruling that was very much in our favor from the standpoint of taking that cloud away. It was almost like we woke up one day and the cloud was gone. So again, that translated to a re-rating of the business. There was a point in time where we owned Google at 15 times earnings. And this thing is growing top line and all of these vectors of opportunity in asymmetry in what was possible and we're getting the best business in the world at this incredible price. So now,

Starting point is 00:41:18 we own Google store, one of our largest holdings. And it's a different array of clouds. It's a different array of understanding. And every day, we're just testing that hypothesis. Sometimes we think about our thesis. I think everything we own, we think about as a hypothesis. And how do we test the hypothesis to see if it's still true? And some days we wake up, So, you know, that hypothesis doesn't feel to be true. This other information comes in. And that might be a point where you can, you know, you'd want to exit an investment, even one that you've had for a very long time. There's a very timely example of these clouds arising in the markets that you look at in the addendum, which is unpublished to your 2025 year end letter. And you describe as the biggest cloud

Starting point is 00:42:07 of 2026, obviously, is software. And my sense is that in recent months you've been able to buy consolation software, which is a stock that usually would be sort of unbuyable for someone like you because of the price, the valuation. And in a way, this gets at kind of the core of what it is that you do. Can you talk about the cloud there? Because it seems like an incredibly difficult cloud to analyze, given the uncertainties about the future of AI and the impact that it's going to have on software. Tell us partly what you concluded about this stock and this sector, but also just how it illustrates your process of looking at clouds and trying to separate the perception from the reality. Yeah, you can always feel into where the clouds are.

Starting point is 00:42:59 Like we even have a title for this, right? William, it's the software apocalypse. I mean, how perfect It is the biggest cloud of 2026. And it's scary. We have transformational technology in the form of AI coming to us. Every day, there's a new model coming out. Every day there's the potential for an existing platform to be disrupted. So what we try to do is we want to go where the clouds are thickest and understands there's something to do there that's intelligent. So Constellation Software, we've studied this business for over 10 years. I've known Mark Leonard, He was a legendary capital allocator, legendary operator.

Starting point is 00:43:38 Had it in the classroom probably three times over our 15, over the last 10 years since I've known him. And when we kind of went and looked at software, we didn't own a lot of software assets kind of leading into this. Software Constellation is trading off 50% off highs in the first quarter of this year. And rolled up our sleeves again, re-under wrote this business from first principles, but we have to still get to the heart of the disruption, right? And we had to deconstruct what was a shallow moat in software and what was a deep mode.

Starting point is 00:44:17 And it kind of developed a framework, which you read in that addendum. And the purpose of writing that, as we talked about earlier, was to really understand this and to write it up so that we as a team could think about this as we looked across the software investments and where we wanted to do the what businesses we might want to own. And so we kind of look at that. There's eight different layers that we deconstructed that we thought made something a shallow or deep mode. The first is your interface layer. And that was the one that if you had a very shallow interphrase software company, AI could likely come in and be, you know, you could kind of vibe code something up and create a better interface. And that made sense to us.

Starting point is 00:45:02 So that was a shallow mode. And so when we looked at horizontal software companies, we didn't want to own something that was horizontal interface level. We wanted to own something that was vertical and deep. So the second layer is the motion that software, so software as a service, how deeply is it embedded in the motion of the enterprise? The third was the memory, like how much institutional memory is involved in how the software is integrated into the business.

Starting point is 00:45:31 The next one, next layer, again, we keep going deeper, is the orchestration layer. How deeply is it orchestrated among different partners, different APIs that are connected? The next is resilience layer, so security protocols, all the different, you know, how deeply it's integrated into the data being safe and protected and stored. The trust layer, you have someone that's on the other side of the phone, if something goes wrong with your software, how capital is allocated. across that software business. How has it been? What are they building? What are they improving? And then the learning layer, just kind of integrated in the flywheel of learning and building software. So that was our deconstructed vertical into understanding from software asset to software asset who had these attributes. And the people who are eagle-eyed or eagle-eared will note that

Starting point is 00:46:25 those letters, you know, it can all be summed up in this acronym, Immortal. which is very, very typical of you. Explain what you're doing that because you've done this before where you talk about things like the Piper mindset, which is perpetual, persistent incremental progress eternally repeated, right? It's like a way of remembering, ordering information. It's another distillation, right, a synthesis of very complex information, a compression. Yeah, I always like to think of a memory tool that is helpful in bringing to bear this framework repeatedly on something. So like our essence of moat is a seven-layer framework that happens to spell essence.

Starting point is 00:47:12 Or I've helped create words to express a very important parts of those layers of moat. And the same with system of record vertical market software. As we deconstructed it, we're like, okay, this is a helpful way for us to kind of take this learning and apply it across the domain of software. I happened to just return from Egypt, and we were in the New Museum in Cairo, and the funeral apparatus of burying King Tut was fresh in my mind, and it was just, I was so shocked at how they thought about immortality, and immortality was something that they planned their entire life around. And King Tut, not only was he in in these different mummy forms and, but the number of different caskets that were there to protect the

Starting point is 00:48:07 body, it made me think of like, that's what we're looking at in software, really. We're looking at all of these different layers to allow for these businesses to be, to endure. We talked about earlier, endure. And Mark Leonard built a system that really spoke to endurance. And that hadn't changed. The cloud that is still resident around software is a perception that these assets could be disrupted versus any evidence that they are. If we were to see churn numbers accelerate in the individual businesses that Constellation owns, we'd start being concerned. They had their first investor day in Toronto, which I took my whole team to.

Starting point is 00:48:49 Got to know Mark Miller, who's now taking over the leadership role, met with a bunch of the different division heads. And, you know, so we've spent a lot of time over the last three and four months to to deconstruct this and look for evidence where is this a perception of a cloud or is this a real cloud. And the hypothesis is holding. We've bought two software assets this year. And as you know, these in a nine company portfolio. And in the midst, William of cloud, It's always like in meta and 22 or perimeter, like whatever the cloud of the year is, it's always feels the same when you're in it. Like a year from now, two years from now, we'll have a conversation now.

Starting point is 00:49:32 I can say, okay, we were right on this or that or maybe we misunderstood something, but we're in it right now. And this feels the patterns and feeling feels like this is going to be a very productive investment for us. But we'll see. Well, last time we spoke on the podcast, which I would encourage people to go back and listen to, I think it was literally on the day of the tariff tantrum announcements when the markets were melting down, and you were, I guess, in the midst of buying Tesla and Amazon, Tesla much more detested than Amazon, which we'll get to in a few minutes.

Starting point is 00:50:07 But I think the point I wanted to pause on an emphasize with consolation software is something you wrote in this addendum where you said, you need to slow down, look again, and recognize what has been built layer by layer over time. And so what we're talking about here is that there was a kind of, there was a kind of moat that is, as you explain in that, addendum relies on dense interdependences, right? It's really difficult to rewire the whole. So maybe there's like a little bit that is very vulnerable,

Starting point is 00:50:38 but to rewire the whole thing is unbelievably difficult. And so again, it's something where, as you put it in, in that piece of writing, perception outruns evidence. Does that raise any thoughts for you, any comments on that? Yeah, as we talk to some of these vertical market software business that are a system of record assets that have this deep layer of interdependency, the other thing I'll add is that what we're finding is AI isn't necessarily the threat, but actually could be deployed on top of this in and on, like an ontological layer that improves their business.

Starting point is 00:51:17 proposition to their customers. And so we're seeing more evidence of that as we're talking to, say, Jan Moore of Chachper's group or Mark Miller and his team, is that they're seeing more opportunities where AI can be deployed in a way to add more value. And maybe some of that value added could translate into additional revenue sources. So we'll see. We see more evidence that AI is actually helping them and hooting them at this point. But yeah.

Starting point is 00:51:48 I think part of what's interesting also that's worth emphasizing is that you have this competitive advantage that comes from a network of people who become really valuable sources, some of it through teaching for, I guess, the last 15 years now, right, at Columbia. And so I remember when I sat in on your, on a class series a few months back, I'm sure before the consolation software purchase on the day the Nick Sleep came to speak, Alexis Fortune also came to speak, who this Irish, I guess, if I remember rightly Dublin-based investor, who runs a firm called Black Sheep. And he had an enormous position in Constellation Software. And so I'm sort of thinking, you know, you've had Mark Leonard come through three times,

Starting point is 00:52:33 who's sort of almost impossible to get an interview with. You know, how does that work where you have this kind of mastermind group around a business or a sector that you're investigating? It's incredibly helpful and important. There's been a, I've had a close, one of my best friends owns an extraordinary software business in Rufin. And so, you know, helping and being part of his leadership around that business over the last 10 years is also another, it gives you a different layer of insight versus maybe what you can glean as a public equity investor.

Starting point is 00:53:13 But yeah, the network, the network's really, really valuable. What we tend to do on a weekly basis is we kind of have an understanding of what our questions are, what are our MIQs, what are our most important questions, and who can help us answer those? So every Monday, we kind of create a hierarchy of those questions that we're seeking answers to, and we go to find those people. And oftentimes those contacts are in our network, and we can reach out. have a conversation, that leads to another conversation, and you just keep doing it.

Starting point is 00:53:48 And then you understand, okay, let's prioritize what are the M. Iqs now with this investment or this new thing we're looking at, and the network becomes invaluable. And 15 years of doing the class, as you noted, it's been transformational in having a deeper connection with a group of investors and operators that you've kind of done this thing together with the students. you've built some trust and it allows for those conversations just to come naturally. I think that whole idea of trust is really, really interesting. And when you came to talking in Omaha, I was hosting a celebrating Charlie Munger event, I guess on May 1st, that probably, I guess it was the night before the annual meeting, the Q&A. And you and I

Starting point is 00:54:32 chatted at some length on stage about the seamless web of deserved trust, this idea of Charles. And I think it's worth pausing and dwelling on it a bit because I reread a chunk of your essay on it. And it's such an important idea. And Charlie famously had said that the highest and best culture is a seamless web of deserved trust. And he talked about the Mayo Clinic as an example of this. And he just said, you know, there's not much procedure. It's just totally reliable people correctly trusting one another. Can you talk about this idea that you drew from Charlie, I think, that trust is a long duration asset and that its full value appears only over time, as you put it. Yeah, I think one of the most important insights from physics

Starting point is 00:55:23 is understanding entropy or where friction lives. And when you reduce friction or reduce entropy in any system, you allow more information to flow through that system. And when more information is flowing values being created. So a seamless web of deserved trust allows for more information to flow more easier, more fluid. And it was like this, you see it at Berkshire, you know, and 20 to 40,000 people show up. And that collective feeling that they've created over 50 years is a feeling of trust. It's deserved trust.

Starting point is 00:56:01 It's doing the right thing when no one else is looking. And that allows for other emergent things to happen. I'll sell my company to Berkshire and not this other company because I trust them. I trust that they're going to honor this relationship I've built with my employees. They're going to honor or act honorably for a long period of time. And so I think it's the most important thing a young person can do is to operate with such a level of you want to get to that point to be trustworthy, to deserve trust of your friends, your family, your, whoever you're interacting with.

Starting point is 00:56:47 And because you've shown up, you've done the right thing countless times, you've done it when no one else is looking. And then I think the emergent things that happen after you've lived a long time doing that is pretty remarkable. And it's hard to, it's hard to point to it like linearly, but you have this exponential outcome that is, it's hard to, it's hard to point to, oh, yeah, this led to this, led to this. And it creates these moments of just really amazing luck that follows you. Yeah, it's an overwhelming benefit. And I think I wrote about it in ritual-wise a happier is what I called the Minch Effect.

Starting point is 00:57:27 Like if you're a munch, if you're just a kind, decent person, it has this kind of compounding effect. And there was a paragraph from your essay on trust about the compounding of trust that I think it's such a beautiful insight that I'm going to read it. Because I think if people really deeply internalize this idea, it's one of those things where, you know, as Charlie said to Nick Sleep, I can only teach people what they already almost know. This is something we already almost know. But it's like, it's like, oh, it's a deep truth. I'm going to read this paragraph that you wrote, which I really love, where you said, the trustworthy person does not simply become more liked. They become more usable by the world.

Starting point is 00:58:06 More people can rely on them. More responsibilities can flow through them. More opportunities gather around them. They become, in effect, a stronger node in the graph of human relation. Where deserved trust compounds long enough, something like a super node emerges, a person or institution through which extraordinary amounts of coordination goodwill, capital, truth and responsibility can move because the surrounding network has learned

Starting point is 00:58:33 that the flow will not be casually corrupted. And then you said something really beautiful that I really love where you said the deepest question we can ask in any enduring bond is, quote, can I safely place part of my life in your hands? I think that's such a profound question to ask when you're investing with someone. You know, I mean, I placed part of my retirement with you.

Starting point is 00:58:56 And so, I mean, that's literally me looking at you and saying, can I safely place part of my life in your hands? And so I think you're getting at something hugely important. And, you know, when I first read that essay after you sent it to me, I remember texting you back and saying that I think being trustworthy in some way is an expression of unconditional love because it's sort of dropping one's own agenda and caring for others and putting their interests first. And maybe it's so unusual in the business and investing world that when you see it, you're like, oh, man, that's powerful. And it's everything. And we certainly ask that question of every company that we're invested in. And when you own less than 10 companies, you can't make a mistake.

Starting point is 00:59:43 Every investment has to be asymmetrical. And you're ultimately making a decision, you're making a discernment of the operator. to act in a trustworthy way, that you can, that you respect their judgment. The last essay that I've written is called Keystone. And Keystone, just thinking about an arch, right? If you look at an arch, there's something in the arch that's doing a lot of, it's the keystone in it. And the keystone for me is judgment. And as we have some of these tools available to us where we're allowing AI, maybe an LLM to contextualize something, there's a chance to lose the connection with the source material. And when you're removed from the source material, it's very hard to

Starting point is 01:00:34 discern judgment. And it was something that we've purposely built a small team, a three-member investment team. And the design of the architecture of that is so that we can share in the learning together of the source material. I'm not outsourcing a reading to a sector analyst. I want to be part of the reading so that we can all come to conclusions about quality, about valuation by touching source material. The minute you give an LLM or an agent or some analyst sector analyst, I'll be here, to read that source material and interpret it, I think you lose that connection with something that's really valuable. And so judgment and trust kind of come together. Ultimately, I think if you're allocating capital to someone, you're making it, you're trusting that that judgment is going to be,

Starting point is 01:01:29 continue to be well-founded. You mentioned the word source and you talk about architecture a lot and you often talk about this word that you've coined, source built. And you wrote in one of your essays about the Sagrada Familia Cathedral in Barcelona and also about St. Paul's Cathedral in London about how there are these timeless buildings that sort of survive because in some sense they're source built and that there are rare businesses that are also source built. And you said one question that's been central to you is, quote, why do some things keep gathering force as time passes through them while others begin to die almost as soon as the novelty wears off. Can you talk about this concept of things being source-built? Because it's hugely important and it's not, I mean,

Starting point is 01:02:17 in a sense, it's not self-evident. It requires some unpacking, but I think it runs through all of these things you're discussing. Yeah, and I think for a long time, the working title of some of the essays was called Edge Node, where I was applying graph theory to the understanding of different laws and observations, it's morphed to the working titles called Source Built. When I think about that which is built from first principles or aligned with nature, aligned with how the world works, it's aligned with source. It's aligned that foundational structure, that architecture. I had known that there was purpose built, right? We talked about things that are purpose built. So source built felt something that was much more foundational.

Starting point is 01:03:07 It came from a different grounding. It was aligned with very, very long, a long thread that went through human history and biology and chemistry and physics. And you could trace that thread all the way back to the beginning, 13.7 billion years of data, right? And that's what I'm referring to as source belt. And I think if you're following that source built thread, yes, you can follow it into investing. You can follow it into your relationships.

Starting point is 01:03:37 You can follow it into teaching. So the word, though, William, which I may have shared this with you, I discovered it when I was working with my favorite philosopher named Heraclytus. And so I was reading a lot of Heraclitus's fragments at the time. It was one of my quarterly deep dives. I had a couple deep dives going at the time. I was thinking about arches. and I was thinking about Heraclitus, and I was reading these fragments, different sources,

Starting point is 01:04:04 different translations. And Heraclitus was known as Heraclitus the Obscure. And he was known as the Obscure because he would often work with paradoxes, where there'd be multiple truths that you were holding at the same time. And he understood this as being really important philosophical underpinning of the world. And as I'm looking at Heraclitis the obscure, literally the letters, I'm like, oh, am I seeing something, I see arches. I was like, that's interesting. Arches is in Heraclitus the Obscure. I'm like, what else is in there? I'm like, the, the arches. Well, that's cool. And then all of

Starting point is 01:04:40 a sudden, I see the word built. I'm like, oh, this is starting to get a little weird. And then I'm like, oh, what's left? And I rearrange the letters in its source. The source built arches is an anagram of Heraclytides the obscure. I literally fell off my seat. And I was like, I'm like, oh, is source built a word? It's kind of like purpose built. And so that was my first relationship with the word source built. And it was such a beautiful discovery. And it's been a big, it stayed with me.

Starting point is 01:05:13 So it gets at a sense of an underlying structure. I mean, I was trying to put this together from your various essays. And there's a line where you're describing source built and you say it's aligned with a prior order with the way reality bears weight, Kara's life transmits, course, joins weakness into strength and allows more to pass through than the builder alone could have planned. I mean, it's interesting. It reminds me in some ways of Nick Sleep would often say, you know, who's a mutual friend

Starting point is 01:05:39 of us, would often talk about when the world is working the way it should. You know, I'm slightly misquoting him, the world working right. There's a sense of a sort of underlying structure of things. It's like, it's like, you know, Charlie always talking about win-win relationships, which you talk about as well. There's like, or companies like Costco sort of making enormous amounts of money and then sharing those benefits with their customers and creating a flywheel by having this pattern of scale economy shared as Nick and Zach figured out. Like, you feel as if you've kind of connected with some underlying principle of life. Yeah, that's it.

Starting point is 01:06:22 That idea of the general law. So if you think of an arch, right, an arch is. This is Da Vinci's definition of an arch is two weaknesses brought together to create a strength. And so if you think of an arch, well, what's the utility of an arch? Well, a lot of things can move through an arch. It could be a portal. You could create a door, a portal. You could build a bridge.

Starting point is 01:06:44 You could build a dome. And so you mentioned Sagrada Familia and Gaudi and Christopher Ran of St. Paul's Cathedral. At the highest application of an arch, this dome-like quality can be built. And that, to me, is source built. It's what can we do when these win-win structures come together and align with these principles of how things grow and grow better? And so it's been kind of a guiding principle to kind of find these dome-like qualities in business and in systems.

Starting point is 01:07:25 And then when I find them, they're first built by nature. Let's take a quick break and hear from today's sponsors. They say every day your business is late to AI. You fall two days behind. And the competition, they're only moving faster. Fortunately, there's NetSuite next. You probably already know NetSuite, the AI-powered business suite that securely connects all your data,

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Starting point is 01:09:32 automate your security and compliance and earn, improve trust. Get started today at vanta.com slash t-I-P. That's V-A-N-T-A dot com slash T-I-P. So I think as people are starting to sense, part of what you're up to is you're looking for these underlying structures that are emerging, that are sort of the world working as it should. And one of the most controversial investments, possibly the most controversial investment you've made was a new investment you made in 2025 that you've been researching since the fall 2023, which was Tesla. And when we spoke, I think our last interview was on April 2nd, 2025, I lost interview on the podcast at least. It was at the absolute height of the controversy.

Starting point is 01:10:18 And people should go back and listen to that because we talked about it in some depth. But can you talk about how Tesla is kind of this perfect example of something emerging, some structure emerging or a series of structures, you know, emergent graphs or graphs, as you would say, or as I would say, these emerging graphs that other than, you know, these emerging graphs that others aren't necessarily recognizing in all of these different businesses. Because I think this is such a beautiful example of separating the signal from the noise and kind of looking to see beyond all the controversy about Elon and all of the controversy about the valuation, that there's some structure emerging that we would do well to recognize

Starting point is 01:11:05 and linger on. Yeah, when you had, I remember we were getting ready for the interview in April 25, and you're like, I'm going to ask you about Tesla. And I was like, oh, William, please don't ask me about Tesla. And then I think just before we went on, I'm like, ask me about that. That'll be fine. And we were able to unpack it in a way I think that was also, it was at a time where I think a lot of people were feeling the tension that was what was happening

Starting point is 01:11:32 politically in our, in the country and more broadly. And it was hard. And I had put a circle around Tesla. I put a circular on Elon and found that he was uninvestable. I had an opinion about that for a long time. And I think I shared in the podcast that I had gone on a retreat with a group of investors to their mountain. We go every year to Long Walk Retreat and we spend time just talking through things.

Starting point is 01:11:58 And I was asked to moderate a panel. And I left that experience saying, you know, I had to go back and do my own work to understand this because a couple of people that I respect a lot had come to a very different from conclusion. And if they were right, this would be very, very important. And it actually would click a lot of the things that we look for in our Grove of Titans type business. And it was misunderstood. So I left that experience. It spent a couple of years. It took me a lot of unpacking to get to a place where I thought it became investable, or at least my understanding of it did. And certainly the sell-off in that April 25 period gave us a window. And it

Starting point is 01:12:39 continues to this day. It's a very important and material position in the portfolio. I think about it in terms of five, there's really five businesses that are a really important order for Tesla alone, and that's their core EV business, which is a means to an end. And that's been something that's building for well over a decade that is an enabling technology to do something else. And that something else is full self-drive. Basically, they've created a platform and built software that will allow for autonomy to scale globally. And whether through personal transportation, you could own a Tesla and full self-drive as software as a service can drive you around that's available today. The next extension of this is going to be Robotaxy.

Starting point is 01:13:34 And Robotxy today is rolling out in cities across the country, eventually across the world, Austin, first, San Francisco, Miami recently announced the last couple weeks. We're at a point where the software has solved autonomy. I think 1% of the world actually understands this exists. It's solving autonomy translates into, you know, if you look at the data, I think it's not going to be about 10 times safer than a human driver. So there's a safety backed by data incentive to have this technology regulatory-wise, maybe even as a personal car driver, you may choose safety. I was thinking about this today, about at what point did we start wearing helmets when we

Starting point is 01:14:23 went biking? And if this is a 10x safer technology than a human driver, perhaps there's even even a greater incentive to have a larger amount of driving that's done autonomously. One of the questions that we had asked in class last year, and I asked every guest because it was interesting how the answers changed over the course of the semester, I said, what percent of total miles driven globally will be autonomous in 10 years? I think the student group answered that about five or 10 percent. A lot of our guests, including James Anderson's at formerly with Bailey Gifford and Deval Schroff at Tesla's autonomy division, their answers were over 80%.

Starting point is 01:15:09 And if you think of that end-state question and you work backwards, technology tends to be winner-take most. If Tesla is the only general solution for autonomy versus, say, Waymo, which is a different set of how they've solved it, this is a general intelligence. What does that mean for cheaper, better, faster, safer, robo taxi? So that's one component of the hypothesis that, as that rolls out, will be much clearer to investors and to the profitability of the business. The last piece, we don't have to talk about Tesla Energy, but that's another...

Starting point is 01:15:45 We should talk about that too, because it's another beautiful example of an emergent graph, right? Yeah, yeah, the Tesla Energy is basically a grid 2.0 emergent, and that's thinking about how do we store and smooth out our energy usage? So more and more of our energy will be generated through solar, and we need batteries. We need large-scale batteries. And Tesla is purpose-built to deliver large-scale battery storage. And they've been very, very successful at building capacity and rolling this out globally. And that will still be, that will continue to be a very important piece of Tesla. And this is actually built by J.B. Straubel as a kind of a skunk works project. And we got to meet J.B. together. And Elon's like, J.B., what are you doing? You got to shut that

Starting point is 01:16:35 down. Let's focus. We've got a lot of things we've got to work on. And J.B. kept building that business. And now it's going to be a very important, not just important business for Tesla. It's important business for the world to have that type of storage capability. And Tesla can do it at scale better than anyone. The fifth business, which is the humanoid robot, is going into production this year, and we have a V production level product ready to come out. So you have two legs of the stool of the five that are probably going to drive 80% of the value creation, just kind of moving into the sweet spot of the beginning of the S curves. And that's kind of happening this year, into next year.

Starting point is 01:17:17 So Tesla's a very exciting business. is I look at these technologies as inevitable, not VC. Like, I wonder if they can build a time. No, they've done it. I wonder if they could build Optimus. They've done it. We have a V production ready. With Optimus, there's three things you have to get right.

Starting point is 01:17:35 You have to build a dexterous hand that has 22 or more degrees of freedom. They've done that. You need to have the capability to produce at scale. Tess has proven they can build factories better than anyone. And then the third piece is the intelligence. and they had the intelligent capability built from their autonomy AI that they can deploy into Optimus. So we think they're very well positioned for this next move into robotics, which will be very

Starting point is 01:18:03 important for them. You and I had a conversation in Goodwood a couple of years ago with our mutual friend Frederick Blackford, who I'm grateful to you for introducing me to his really lovely, lovely human being and the wonderful James Anderson, who's this great investor for. from Bailey Gifford originally, although now Lingotto is it? Lingotto, yeah. And we talked about Tesla, among other things, as an example of what you and they have started to call value 3.0, this sort of shift, this great leap from Ben Graham, who was

Starting point is 01:18:36 value 1.0 to Warren and Charlie, value 2.0, and now value 3.0. Can you talk about Tesla as kind of an example of this? Because old-fashioned people like me, the sort of purest sort of, oh, we're always asking you, well, so where's the margin of safety? Where's the margin of safety? And in some ways, you know, you're the torchbearer for Ben Graham as the person running his class. And yet you're sort of, you're looking at Teser in a way that's very, it requires a different set of skills, I think, to look at it this way. Tell us how it embodies value 3.0. Everything that a value investor does and thinks about has to be asymmetric.

Starting point is 01:19:20 And so, asymmetry is at the heart of value one, two, and three. What is my margin of safety? What is the floor? How do I lose? How can I have permanent loss of capital? You buy something that's too expensive, you can result in a permanent loss of capital. Value one, you know, Ben was just saying, okay, I have a collection of assets. They're worth a dollar and I can buy them at 50 cents on the dollar.

Starting point is 01:19:47 maybe less. Buffett Munger, let's buy a great business at a reasonable price. But that reasonable price might be, I can buy it at 10 times earnings or 12 times earnings for Apple. And I can own that for a long period of time. I don't have to buy, sell, and reinvest. That's smarter than one. It's an extension of value investing.

Starting point is 01:20:07 We can look to these levels of value and they're optically there. Value three, and I think Nick was one of the torchbearers here, Nick's sleep when he was looking at Amazon real time in his nomad letters was, okay, optically, Amazon didn't look cheap. You had to do some things. You had to add back some of the investments that they were making and understand what the margin potential of the business is to understand the true nature of the valuation. In hindsight, Amazon was one of the cheapest companies in the world. It was compounding at 47 percent from that point. So we need to be. know that the toolkit that we had available of Value 2 and Value 1 wasn't the full toolkit

Starting point is 01:20:52 we needed to do this other type of investing that Value 3 became. And then when we look at Google and we look at meta and we looked at all these technology companies that just required a different lens of analysis, Tesla meets that. I think when you have to understand at the inevitability of the core technologies with which that they are, that they're building. And this is, This isn't a coin flip. If this works, then what? That's not what we do. That's why Tesla in its early days, I don't regret not investing at a time where James

Starting point is 01:21:27 Anderson did because that doesn't meet our criteria of inevitability. He may have seen it. We wouldn't have. But there was a point where escape velocity was met in a business like Tesla, where the technology, the platform, the foundation was built. And then there were vectors of asymmetry that emerged from that point. I don't like vectors of symmetry. I want vectors of asymmetry.

Starting point is 01:21:50 And that passed. In 25, probably into 24, those asymmetries became very clear. And I think we're in the early stages of those asymmetries playing out. And the future is pretty exciting. I would say to underwrite Tesla today, you have to underwrite SpaceX as well. I think we have a likely, there's likely a merger within the next 12 months between Tesla and SpaceX. So we've spent a fair amount of our resources over the last year and understanding SpaceX from first principles, underwriting it, and thinking about what does this look like as one

Starting point is 01:22:30 entity? And you had a backdoor investment in SpaceX through Echo Star, which you own, which I think had sold its, it's something like $11 billion worth of spectrum assets to SpaceX. So you sort of had figured out there was a way to get access to SpaceX privately. In one of your pieces of writing, you said SpaceX is one of the most extraordinary businesses we have ever examined. You said Starlink in particular represents one of the most powerful emergent graphs built in the past two decades. Can you talk about that again?

Starting point is 01:23:03 Because again, it's like a beautiful example, I think, of once you start to see the world in terms of these underlying structures, these graphs and nodes, you kind of can't unsee it. So talk to us about SpaceX also as kind of an example of an emergent structure, an emergent system. And also, maybe you could talk a little bit more about this idea of edge nodes, which I think are very relevant both to SpaceX and to Tesla, right? and explain to us what the concept is. Because, again, you need to repeat it a few times to me before I start to understand it. It's a complicated idea. Yeah. Yeah, SpaceX is a very special business.

Starting point is 01:23:43 And it's becoming more well known now that it's in the public markets now and being covered by lots of sell side firms and so forth. But there's still a lot of misinformation, I think, out there. But at its core, you have a business that has built a launch capability. in the form of a reusable rocket. And that was a novel idea when they started that process, and it's revolutionized the ability to put payload to space. So prior to SpaceX, it would cost around $50,000 plus to put a kilogram to low Earth orbit. What Falcon 9 allowed for was, a kilogram to go into Leo for about $2,400. And what did that do? It allowed

Starting point is 01:24:30 for them over the last six years to build Starlink. Starlink is a constellation now of 10,000 plus satellites producing really high bandwidth connectivity to the world. You could argue that this is kind of internet 2.0 nodes and edges, but now built in a mesh around Earth that's cheaper, better, faster, safer. When you think of the, if we were to rebuild the internet 1.0 and you had an opportunity to do 2.0, would you dig up all the roads and put all the fiber optics? As you continue to densify the network of a constellation with laser-link connectivity between it, what we're seeing is speeds are getting faster and faster and faster. And so more customers that may have been fringe customers or maybe saying, yes, I'm going to opt for Starlink versus some other service

Starting point is 01:25:24 that is available terrestrial to me. And so Starlink has been this really fabulous graph that's emerged from this launch capability. And what we have now is you have the next iteration of launch, which is Starship. Starship has the capability given size in both stages of reusability, first and second, to reach a go from $2,400 a kilogram to Leo to $100 and potentially as low as $10. This cost curve, we study cost curves very carefully, when you look at the cost curves, this kind of cost curve, what happens when you see big changes in cost curves is you have a phase transition. And we're in the midst of a phase transition where things that were possible

Starting point is 01:26:10 in space are now possible with Starship. And so you have to have a view on, is Starship solved, is V3 Raptor engines? V3 Starship, the unlock capability to get to this $100 a kilogram to lower Earth Earth Earth Earth, we believe it is. We believe the heat shield and other things are solved. And now we have an exclusive launch vehicle for an emergent space, which is everything off Earth, which allows for the next iteration of Starlink, which is going to include direct-to-sell communications, maybe our phones. So all these nodes are now emergent for Starlink to form customers. We also have Robotexies coming online, internet of things. And so the more and more nodes that need to connect seamlessly to this graph will be business

Starting point is 01:27:00 for SpaceX as we move forward. The other business that is being talked about now with SpaceX is it's in the business of compute. So they have a real capability to build terrestrial compute faster than anyone else. And we saw this leading up to the IPO. They were able to sell some of their terrestrial compute two. to Anthropic and Google, big headline contracts. But the big win for them is going to be to move some of that compute from Earth to

Starting point is 01:27:32 lower Earth orbit in the form of their AI-1 satellite, which will be an orbital data center. And so the same graph, remember William, I always say, when there's an emergent graph, I pause and reflect, this is going to be one of the most important emergent graphs over the next five years is orbital data centers. And this isn't necessarily a hard problem. I'd say the satellite constellation is a harder problem than I think orbital data centers is, even though it sounds crazy that, wait, we can put data centers in space. So the path to that we think is a highly probable path, and it could be transformational to the point where I think it'll be 75% cheaper to do an orbital data center than it would be a terrestrial data system. Again, a cost

Starting point is 01:28:18 of driving down, you're going to be the low-cost producer of intelligence to the planet. And that will be very valuable for SpaceX. When you encounter skeptics who just sort of look at you like you've drunk the Kool-Aid and you're buying into Elon's capacity for hype and the capacity of Wall Street to hype IPOs and all of that stuff, you know, I mean, you must have a lot of cognitive dissonance that you have to deal with with this stuff. Like, how do you respond to that stuff? Because there's so, I mean, there's something really complex here going on, right? Which is important in the trajectory of value investing, which is that you're shifting from identifying mispriced assets to really focusing on value creation. But you're doing it in quite an uncomfortably idiosyncratic way where people, you know, venture capitalists could understand what you're doing. But the sort of people who you and I traditionally have hung out with would look at you and be like, What the hell is he drinking?

Starting point is 01:29:18 Yeah, if you look at the combined entity of Tesla and SpaceX, you're paying $3.2 trillion for a collection of 10 businesses, five we mentioned for Tesla, five for SpaceX. And you have to think about all of those 10 vectors and say, in 10 years, what's the inevitability for that profitability? What's the range of that? And we've spent a lot of time in understanding that. What's the low end? What's the vector on the high end?

Starting point is 01:29:51 And where's that range look like? We could literally fly a starship through that range right now. Like our internal models are almost comical because you're like, what? I've never seen a range this wide. The midpoint of that range is very satisfactory. I think penciling out a 26 IRA in this investment is not hard to do, right? A 10x over 10 years based on what we think the inevitably. ability of those 10 business units are, we think it's a very highly probable outcome because

Starting point is 01:30:20 we've done the work. It's not something that if someone told me that, I'm like, that sounds crazy. But if you actually step back, you actually did the work and understand it, you might arrive at a similar, that's a reasonable, reasonable assumption, but it took a while to get there. Yeah. I think there's something really profound going on here. And I remember having a conversation. I've interviewed Bill Miller, as you know, like many, many times over many years, starting with a profile that I wrote of him for Fortune when he had bought 15% of Amazon and the stock was at $6 a share. So we've been discussing these issues for a long time. And a few years ago, there was an event for patient capital, I guess it was, or maybe it was the company

Starting point is 01:31:02 before that that he was running before it became Samantha McElmore's company, patient capital. And I was interviewing him there. And I was trying to understand. understand sort of the evolution of value investing sort of through his career. And I said to him, so, you know, you had all these friends. He was like Chris Davis and the like buying stuff at a huge discount to what it was worth. And is that sort of what you were doing? Is that the essence of what you were doing? And this is his exact answer. He said to me, no, no. He said, for me, it's about buying them at a huge discount to what you believe they will be worth. And that seemed to me like a huge breakthrough in a way and kind of a controversial one, but that's what enabled him

Starting point is 01:31:43 to buy 15% of Amazon, I think, among other things. Bill is an investor that I think has the best balance of right brain, creativity and understanding where we're going, seeing holes with connecting it to left brain analytical. Like one of such a brilliant investor and I've learned so much from him just over the years in what he's shared. So I love that answer because it's so true. It is so true. And it's how we think. Like, every single investment that we make, I think about what's the 10-year value on this? Like, you know, if I'm buying something in a billion, in 10 years, is this a 10 billion dollar company? One to 10, 10 X over 10 years is 26. Not everything we own is a 26 IRA. A 4x is 15. So 15s are a threshold.

Starting point is 01:32:34 We want to own things that are going to have between 4 and 10x. But that's the, I'm thinking about that end state inevitability is that what does it look like? Can this business look like a 10x over 10 years? And then working backwards and connecting and looking at probabilities. So yeah, that's how we think about it. I think you get at something really interesting also when you talk about right brain thinking and Bill Miller. And Teser is such a beautiful example in a way.

Starting point is 01:33:04 of right brain thinking because you can't just model it. And I was sort of curious how in some ways it grows out of having had the great Ian McGilchrist come into your class, you know, who's obviously an expert on the brain and how to think and the idea that the left brain has kind of come to dominate society and that we're paying a price for it. Can you unpack that a little bit? Because I think it gets at something really important about investing where, you know, there is the very rigorous sort of model building left brain kind of logical stuff.

Starting point is 01:33:37 And then there's this sort of slightly wilder, more creative side. Yeah. So Ima Gilchrist in his work with the matter with things and the master in his emissary has really unpacked an understanding of the brain and how the brain works. And our brain isn't symmetrical where the left is doing the same work as the right. The left is actually our languaging brain. It's our analytical brain. And it's the thing that can focus on something and look at it. We know this through stroke victims, right? They've studied stroke victims, and a left brain stroke leaves the patient unable to talk.

Starting point is 01:34:12 A right brain is creativity, it's context. A right brain stroke, you have inability to actually interact with the world. You become disoriented. You really have no context and understanding, and it's a much more severe stroke. But civilization has become much more left brain. And we think that's the, has happened because of our language. You know, as we've developed more human language and interacting with language, is that our left brain muscle gets, gets activated more than our right brain.

Starting point is 01:34:43 And so we see this in handedness, right? Right handedness is more left brain and more people are right hand than left hand. And so I always say like to try to balance your weak spot, if you happen to be more left brain, how do you to nurture your more creative side, your ability to think more broadly and more context, to see the whole? But sometimes you can't. And I think as an industry, analytical people are drawn to investing. And I'd say over 70% of the students that come through the security analysis class that I'm stewarding are left brain. And that's normal, We can build spreadsheets, we can model the best investors, William, as you know, are the Bill

Starting point is 01:35:29 Miller's of the world, the next sleeps of the world. They're the ones that are thinking very creatively about the whole. And that I think is a real superpower in building a long-term track record that's going to outperform and add alpha. And I think, you know, I've observed that. Charlie was a right-brain thinker. And so even though Warren was more left brain oriented, he partnered with the most incredible right brain person I've ever encountered. And the combination was a lalapalooza. And so it's pretty brilliant. Sometimes you get your complimentary person, it can be sometimes hard because you have these

Starting point is 01:36:12 frictions of not being able to disagree and commit. But Warren and Charlie kind of developed a great partnership where they could disagree and commit. And Charlie just like, okay. You do what you want, Warren. But he would have his input. I don't know if I can articulate this question properly, but in some ways, I keep thinking of you as a connoisseur of these underlying structures, these systems, these graphs that you've identified, not just in the companies that we've discussed so far, but also in all of the other companies

Starting point is 01:36:42 that we could have discussed, whether it's perimeter solutions or Transdime or Amazon. There's always some underlying structure that you're identifying. It might be a company that's just unbelievable at delivering stuff incredibly effectively or incredible persistent incremental improvement over time. So you're always looking for these systems. And I'm kind of wondering when you look at your own life, your life as an investor, but your life beyond investing, if you think about how to structure it as a sort of system that creates long, term value. Because I'm sure in some way, even though you don't talk about it publicly, you're applying the same way of thinking, the same perspective, the same ability to look at systems

Starting point is 01:37:33 and structures that create value. I'm sure you're thinking of your life in that way. Yeah. Everything should be a fractal of the optimal system. Yeah, you had asked earlier about edge nodes as well. And Persig's work on thinking about dynamic quality is about that that leading edge of the train, right? That leading edge is the leading edge of quality that's emergent in front of you. That's how I think about the edge node, right? The edge node is also this emergent intelligence that is increasingly becoming robotoxy optimist. These aren't just passive nodes. They're edge nodes. They have intelligence. They're working on the edge. And they're giving that learning back to the swarm the way like you might see in a beehive. So systems,

Starting point is 01:38:21 Edge node systems, dynamic quality on the edge, or definitely like we're trying to find them everywhere. And we're trying to design a life that also has these qualities, right? That you're constantly learning. You're sharing the learning. You're applying these in different domains, whether it be a hobby or whether it be the classroom or whether it be in the craft of studying companies and that word dynamic is the moving one, right? It's the every day you have to assume that everything's changing. And that's the thing that person tried to point out is if you think you know the answer, that answer is going to be stale like tomorrow. It's the testing, it's the moving it forward. It's that scientific inquiry to continue to get more data,

Starting point is 01:39:15 more information, and that's that persistent incremental progress eternally repeated, is the edge node in practice. It's the practice that you're bringing to your life and to your partnerships, to your friends. And that's fun. And I think that's what all of your listeners are trying to do the same thing. They're listening to these conversations to try to pick up little things that they can do to improve and to add value to their lives and to their life design. I think in some way the paradox is something shifts when you switch from just focusing on yourself

Starting point is 01:39:50 and getting ahead yourself and you start to be like, how do I bring back this good knowledge and understanding to the system to help the network improve? And in a way, like there's something, I'm not articulating it properly and you can help me explain it properly, but there's something in the way that you think about a Tesla car with its eight cameras or whatever it is, reporting back to the system, to the network, to improve the network. Individual is also in some way subservient to this larger network, this larger system, and when the world works properly, you're not just thinking of yourself, you're coming back

Starting point is 01:40:28 and you're kind of using it to help the swarm. Yeah. And the strangest thing my wife or someone might observe our industry in William, you see it real time, is like, wait. those are your competitors and you're sharing all your information with your competitors? I'm like, yeah, that's what we do. It's such a fun expression to share and to be part of the journey together with others. And there's a beautiful tradition.

Starting point is 01:40:59 And I think Warren was one that was always sharing almost all of his insights. And you could take them, you can copy, you could build another brochure if you wanted. And Ben Graham was unbelievably generous. Warren always talks about Ben Graham's generosity and sharing his insight. So the tradition is long and it's a beautiful craft. Some of your listeners are some of the best at this craft. And to know you could do this for a very long time and to give back. And what it's always driven me is the puzzles, right?

Starting point is 01:41:32 Like solving the puzzles is really enjoyable. it's not necessarily for some financial reward or even some mark of, but just going about this and trying to solve it is, is it intellect, one of the most intellectually stimulating things I've encountered in my life. One of the things I've really been enjoying over the last few days is listening more concertedly to your music. I don't really understand how it comes about, like, what role AI plays and what, you know, like I'm sort of assuming that you're writing all the lyrics and you've written like

Starting point is 01:42:05 over 150 songs, I think, and probably way more now. And I don't know what's happening. But some of it is really, really good. And in many ways, you were contributing to me not being able to sleep one night because I had one of your songs going through my head a lot, which is probably my favorite of your songs, which is called The Great Work. And it gets at a lot of these issues of a sort of greater purpose of a, you know, and it's important in a number of ways.

Starting point is 01:42:31 And you wrote about it in the addendum, this sense of the great work. And you said the great work is not scale for its own sake. It's not speed. It's not optimization. It is purpose carried patiently across time. Is the act of building something meant to last longer than the builder? Something that survives not because it is protected, but because it is true. Can you talk a little bit about that song? And also your experience of playing it in Egypt on your trip, because I think it gets at something essential about how you view your career, how you view your work, what it is you're trying to do, the type of companies that you're investing in, trying to identify things that are true and durable.

Starting point is 01:43:13 Yeah, the songwriting was, has come over the last couple years. And as we talked about earlier, you know, writing is a compression of ideas and experiences that that you can put and learn from as you're writing. And poetry was an extension of this. And I've always played with poetry and not something. I publish, but just something I enjoy doing and just playing with the words and how they make you feel. I love music. I've always loved music, but I've never considered myself a musician. Someone introduced me to the idea that one of the AI platforms you can actually put lyrics in and

Starting point is 01:43:51 you get this output of hearing a song. And the minute I did that, I was like, oh my goodness, this is wild. And because the songwriting was just an extension of poetry. It was an extension of of kind of compressions of words and feelings and experiences that then you could take with you. You can listen to them. So it's been one of the most creative parts of my life because of playing with making these songs. And the great work was a song that came in my preparations for going to Egypt. And I was thinking about these places that we were going to visit. And the first place we were going to visit was the Great Pyramid of Giza, and we were having an opportunity to walk into the King's Chamber. And I was thinking about the Great Pyramids. And what ended up

Starting point is 01:44:41 happening is I wrote an album that became called The Great Work, but it was a song for every place that we were going to visit. So every temple and tomb, I was trying to get to the underlying essence of what that, why was that place built? What did it mean? What was the essence of it? And these songs emerged and it was such a fun project as it became part of my pre-travel. And I didn't even publish the album until I got back. And I'm listening to these songs and I was the first place we visited, we went to the Great Pyramid and I'm in the King's Chamber and I'm like, it kind of came to me. I'm like, I think I'm supposed to listen to the song in the Great Pyramid. And quietly kind of in the corner of the King's Chamber, which is a pretty difficult, if

Starting point is 01:45:26 anyone any listeners have been in there. Very claustrophobic experience. it's kind of getting into the center of the pyramid. And I'm listening to this in the corner and I just started to like tears start crying down my eyes. It was such a moment. Then I realized, oh, I'm supposed to listen to all these songs in situ in the place I wrote them for. And it was such a cool experience.

Starting point is 01:45:44 But the great work is, I was thinking about what, why were these pyramids built? Like, what was being said there? What was the enduring objective of it? And it kind of made me realize like everything that we're doing here are you, the writing of your books and the podcast and investing and teaching. It's just all part of like our expressions of doing this kind of this great work. Yeah, I found myself kind of because I'm obsessed when fall down rabbit holes when I'm preparing for these interviews, I found myself using Otter to transcribe your lyrics. And, you know, so I was struck when you were saying, we're here for the great work, not the small self and put your heart in the flame. And you said we were never meant to stand alone.

Starting point is 01:46:30 And so there's this sense, I think of, you know, in some ways you can take the investing process and make it a very solitary kind of rapacious business where it's all just, you know, sitting and trying to maximize your returns at everyone else's expense. And I think what's kind of interesting is you found this way to make it sort of more of a team sport where there's less of it. It's not really a zero-sum game. And what's also curious, you know, when I was reading the addendum of your, year end letter and you were writing about the great work. There's a lovely line related to this

Starting point is 01:47:01 where you said, we are students of endurance, amateur archaeologists in a way studying what has survived and asking why, searching for patterns of permanence, trying to recognize the structures, systems and builders that are oriented towards something beyond immediacy. That search is our research. The internal discipline it requires is our own great work. I just thought that was really interesting. There's a thread that runs through so much of what you do, that you're really interested in buildings that have endured. You're interested in boats that have endured. You're interested in pyramids where people have been buried properly so there were layers of defenses so that they wouldn't just get robbed. Do you have thoughts about that? You know, just comments

Starting point is 01:47:48 on my observation of this thread that kind of runs through everything. I mean, the time type of companies that you're investing in? No, I think that duration has just been this thread that has kind of run through everything. And it doesn't feel like it's, I want to leave a legacy for some egoic reason, but like what is the extension of, I think it's such a deeply embedded trait of ours, right? you look at DNA or any other method with which we encapsulate something and then hand it on to the next generation, it feels like, I don't know, there's a certain sense of joy in it, isn't there? It's like you're part of what you're supposed to do here.

Starting point is 01:48:36 You're supposed to, you know, to make the world a little better and then to hand on what you've learned to others and allow that thread to continue. And that feels good. Every person I've ever invited into the classroom. And these are Fortune 100 CEOs or doesn't matter how they look like a kid to me when we're sitting before our conversation on a fireside chat. They want to have a great experience. They want the students have a great experience. And there's no ego in that moment. It's just, it kind of feels very like a reverse principle. So yeah, I think it's, I think it all connects to this idea of longevity and duration. Yeah. And David Hawkins's terminology, it kind of makes you go strong, you know? Exactly. Exactly. And I think one of my favorite essays of yours that I

Starting point is 01:49:22 read this week is one on scarcity, which sort of starts with you talking about the oddity of being in Essex, Massachusetts and seeing these two amazing Ferrari 250 GTOs, which I think are now worth about $60 million each, and only like 36 of them exist. And so this led you to sort of think about the rarity of things and what makes something sort of precious. And there's a, there's a line I wanted to read because I think it gets at something very different that you're up to here, where you talked about how scarcity in its instinctive forms sees every interaction as zero-sum. Someone wins, someone loses. And then you said, but the game I want to play in markets and in life is different. I want to play with people and businesses capable of durable, mutual benefit

Starting point is 01:50:08 of operating on a horizon long enough for trust, curiosity, generosity, and real alignment to compound in a world still dominated by extraction, that orientation may itself become one of the rarest assets. Can you talk about that? Because I think it's actually a really important idea. And I feel like part of what happened to me is as I grew up, I sort of saw there was one way of doing things. And you're like, whoa, it's just all this really Darwinian stuff. And I'm, and I'm just going to lose if I'm not really sharp elbow. And then, you know, I think what's kind of heartening is sort of to see, oh, no, actually there's this other approach that's not extractive and that's not about, you know, dominate and kill.

Starting point is 01:50:50 Your listener was going to be like, how did he see two, 250 GTOs in his time? Yeah. But just to cure the curiosity, one of the most important restoration shops in the world for these vintage cars is Paul Russell. And he happens to have his shops about five minutes from our office. So once in a while, I just see these incredible vehicles drive by. And it was one day they were prepping two of the most valuable cars in the world to go out for an event in California. So I did see two Ferrari GTOs go by.

Starting point is 01:51:27 And even Nick Sleep's written about these in his nomad letters. So I was like seeing two unicorns in the same day, two different unicorns. But yeah, scarcity, I'm so happy you're reading these things, by the way, because they're it's hard to articulate when they've been in real time. Yeah, that does sum it up. You know, it's these relationships that we're building there. When you were reading that, I was thinking of the Mendelssohn's of HICA. It's a family I've had into the classroom every year for probably the last 12 years.

Starting point is 01:52:04 Larry Mendelsohn just passed away. We dedicated our semester to him. But here's this aerospace company, but it's every member of the families involved, the way they treat their employees, the way they interact with the world. And for that, they get this premium evaluation, this premium experience. They're just doing the right thing and they're doing it consistently. And it's one of my favorite examples to show the students because they're just like, wow, look at how success can look when you behave well and you act with that.

Starting point is 01:52:38 kind of integrity over a long period of time. So you realize that success can be, you can win without this extractive short-termism that might seem like it's the fastest way. And that's one of the principles that we really try to just show by example versus by words. Yeah. Before I let you go, Chris, I want to ask you, if I may, I know I'm exhausting your patience, but I want to ask you about two more things, one of which maybe a little downbeat, but which I think is important, and one less is also important, but more cheering. I wanted to ask you a little bit, if I may, about your first wife, Lynn Begg, who passed away in February at the age of 53. And you and I had talked about it, and I very kindly sent me her obituary. And it's such an amazing story.

Starting point is 01:53:29 And, you know, she's the mother of your daughter, Caroline. And so even though you had divorced, she was such an important part of your life because you were both very actively involved in raising a kid together and you had married young. And I wonder if you could just talk a little bit about what you learned from her, partly because she had this extraordinary story that I read about in the obituary of three different people had given her kidneys over the years, starting, I think, when she was at the University of New Hampshire. And so there's something sort of so amazing about about human nature and also about the fact that she had to live with this life-threatening disease for almost half a century.

Starting point is 01:54:11 And so I'm wondering when, you know, you must have thought a lot about her life and your time together and what, you know, what we, what we can learn from her and how she handled what she went through. He was just extraordinary in her, just in her life and her example of, you know, dealing with hardship and disease, like, for her whole, you know, kidney, disease her whole life. But to do it in a way that was such composure and never wanted sympathy at all. So, yeah, no, she's, we miss her a lot. Yeah, I was really struck there was a line in obituary where it said Lynn was a warrior battling kidney disease since the age of five and yet

Starting point is 01:54:54 living a vibrant full life filled with love and laughter. I'm always like so impressed with that because I have such a capacity for whining when things are good. And when you look at someone, I always think about how I snatch defeat from the jaws of victory by complaining about things. And when you look at someone who, she could, you know, be so active, you know, in terms of her interests, her sports, you know, sailing all of these things while having that condition. There's something kind of stunning about it, right? Yeah.

Starting point is 01:55:24 No, she's a wonderful example of all the things that we've talked about today. and just resilience and just living, doing the great work, really. Yeah, I also thought there was something really lovely. I'm sure you would have noticed this. And I'm sorry to put you through talking about this, but when you were writing to me about going to the burial, and I was looking back and I'm like, wait, it was at a church called Our Lady of Good Voyage Church?

Starting point is 01:55:50 I was such a beautiful, I mean, like giving you a love of boats and surfing and sailing, you know, and her love of sailing, like such an amazing. thing, that just the name of that, Our Lady of Good Voyage Church. It's such a beautiful church. It's in the great town of Gloucester, Massachusetts, which is a place that she lived in for the last 10 years. And it's such a, it's a beautiful church because it was the church that a lot of these fishermen would, you know, when they passed away, the services would be there and just how much of the ocean is, is surrounded by that town and both the highs and lows of living in Gloucester. So it was a beautiful, beautiful service, very fitting

Starting point is 01:56:35 celebration of her life. Yeah. Anyway, I hope you don't mind. I wanted to mention that because I think it's always good to sort of honor the memory of people who've played an important or be a complicated role in our lives. And on a sort of more cheery note, like, I wanted to ask you about another experience with your son, with the beautiful name River. Because we had been texting back earlier in the year, and you texted me and you said, I went to surf today. It was a full moon and I get to the beach and it was darker than expected. Then I realized I was experiencing a full lunar eclipse in totality at that very moment,

Starting point is 01:57:14 4.30 a.m. or 3.33 a.m. Eastern Sanatime. And I wonder if you could talk about that experience because it sounds like such an unbelievable experience and such an amazing thing to share with a young kid. It was so cool. Yeah, one of the things that we set our monthly calendars around is surfing the full moon. And, you know, the morning of the full moon, it's, you know, you get out there at 4.30 and usually have a 45 minutes prior to the sun kind of surfacing. You get this moment that the ocean texture feels like silk. There's some, such, so alive to kind of surfing with the moon kind of coming into the ocean, just to.

Starting point is 01:57:57 at the time that the sun is kind of lifting up and you get these both experiences at the same time. And my son, who's finally just emerged into going from seven years old surfing whitewater to now being out, out the back, surfing real waves. And it was his first full moon surf. And we get down to the beach and we're like, did I miscalculate? I could have swore this is supposed to be a full moon. Where's the moon? And it was like the universe laughing at at us in such a beautiful way. And I'm like, oh my goodness, this is, this is the lunar eclipse. And it wasn't just, oh, it's, it was at the exact moment of the eclipse. It was completely blocked out. It was so extraordinary. And it got to experience it with the river. And we still

Starting point is 01:58:45 paddled out and got to surf. It was much darker than we normally would have had it. It's really lovely. You said to me, you know, that you went back to get river so he could see it. we sat there on the beach together until the sun rose. And I texted you back and said, I wonder if River will remember sitting with you on that beach till sunrise for the rest of his life. And I said, that's an A1 piece of parenting. And you wrote back, thank you. I know I will.

Starting point is 01:59:10 And I just, for me it was very powerful because it was like this thought of like, here we are sort of in my case writing about it. And in your case, practicing this craft that's all about building wealth. And it's like that, you know, in a way like, what greater sense of wealth could you have at that moment with your boy on the beach, you know, watching, watching that. It's been such a gift to see him experience nature at this level. I having learned how important it is and him experiencing it as part of the texture of his life, you know, these experiences with being here in Costa Rica or or and having that

Starting point is 01:59:52 connection. It's, uh, it's really cool to see. It's really cool to say. And we have our youngest, who's now one and a half, 17 months now, starting to wake up to the same newness of life. And as I think we discussed last time, named Piper. Piper, yeah. Yeah, after that acronym of persistent, persistent incremental progress eternally repeated, if I remember rightly. You got it.

Starting point is 02:00:18 So I also loved your idea that kids, in a sense, edge nodes. Can you just explain that to sort of dot the eyes and cross the tears? Because in a way, it completes this picture of everything being a graph. It does. Yeah. I think having close contact with where learning happens is very special. And with a child and seeing learning through the eyes of a child, the proximity to the contact of their experience with novelty.

Starting point is 02:00:57 Learning, I dropped my son off at skateboard camp today. And he's doing, trying to figure this new thing out. And the proximity to learning is that edge note experience, right? It's like, I guess that's what gets me excited about going in the classroom every year or seeing it through the eyes of a 17 month old. And the way that a 17 month learns is by crying, right? His idea of reality is just been completely obliterated and it breaks out in tears and that's a learning experience, right?

Starting point is 02:01:28 Maybe some of us we continue to learn through tears. And it's a yeah, so that proximity to the where reality and learning interface is a gift. And we see it through our children, we see it through students. I just had a, my good friend Paul Bueser was here for a week with his daughter Lily and she's 17 and she did an internship this week with us. It was so fun because she's in this threshold moment of writing her college essays. And so we're introducing her to some of these investments. And you could see her eyes are just like, I didn't know this world prior.

Starting point is 02:02:05 It was such a kind of like a moment to see it, you know. And so I think each stage in life we have these. And the more we have, the better life is, I think. Yeah. You always leave me with a sense of everything being kind of an adventure. I should be optimistic because there's cool stuff coming. So thank you. Chris, it's always such a delight chatting with you.

Starting point is 02:02:28 And I always just feel like after we talk, I'm like, I'm really glad you're in my life. I really am. And so I'm grateful to have you as a friend. And I've learned a lot from you over the years. And I should really give credit to Josh Tarasoff, who introduced us and knew that this would be a relationship worth forging. And I think from the moment I met you, I was like, this is someone I want in my life. Thank you, Chris. Well, William, you've given so much to my life and I've loved spending time

Starting point is 02:02:58 with you and you're such a student. I love everything you're doing and a little shout out to Josh too. Josh is a dear, dear friend. I'm so happy he introduced us. A lovely man. All right, well, thanks so much and hopefully I'll see you again very soon. Sounds great. Thanks, William. Thanks for listening to TIP. Follow Richer, Wiser, Happier, on your favorite podcast app and visit the investorspodcast.com for show notes and educational resources. This podcast is for informational and entertainment purposes only and does not provide financial, investment, tax or legal advice. The content is impersonal and does not consider your objectives, financial situation or needs. Investing involves risk,

Starting point is 02:03:39 including possible loss of principle and past performance is not a guarantee of future results. Listeners should do their own research and consult a qualified professional before making any financial decisions. Nothing on this show is a recommendation or solicitation to buy or sell security or other financial product, hosts, guests, and the Investors Podcast Network may hold positions in securities discussed and may change those positions at any time without notice. References to any third-party products, services or advertisers do not constitute endorsements, and the Investors' Podcast Network is not responsible for any claims made by them. Copyright by the Investors Podcast Network.

We Study Billionaires - The Investor’s Podcast Network - RWH070: Hunting For Hidden Treasures w/ Christopher Begg

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